We’re living in interesting times, as the cliché goes, but that’s hardly a curse for investors. Stocks are climbing, despite the ongoing corona crisis and the shaky economic restart. By now, we all know that Q2 GDP fell badly; the 39.2% contraction was the worst since record keeping began. It would appear that the really bad news was already baked into investors’ expectation.
One way to gauge the quality of the markets is to watch the corporate officers. These execs and board members are charged with guiding their companies through good times and bad – and they are privy to more information than the general public. Since it’s only human nature for them to use that info in their personal stock purchases, regulators require that they publish those purchases. It helps to level the playing field; we get to see what the insiders bought, and how much of their own money they put down.
TipRanks collects that insider trading data, and puts it in the context of the larger markets. The Insiders’ Hot Stocks tool lets you follow the insiders, sorting the data by stock or by trading strategy. It’s a smart way to get an inside track, and to demonstrate, we’ve picked three stocks that have recently skewed strongly positive on the strength of insider trades.
T-Mobile US (TMUS)
The third largest wireless provider in the US markets has had a good year. It completed its merger with Sprint (previously the fourth-largest wireless provider) on April 1, and has not only recovered from the February/March market crash, but surpassed its February peak share value.
Looking ahead, T-Mobile expects to see rapid gains from absorbing Sprint’s customer base and from its own heavy investment in 5G. T-Mobile rolled out the service on a limited basis in 2018, and has since expanded to cover most major urban centers. The union with Sprint added that company’s 5G service to the mix, and T-Mobile launched a 5G network on 600 MHz (the primary band for the service) in December.
All of this has supported the stock price, and three members of the Board of Directors bought up blocks of shares recently. Board member Raul Marcelo Claure spent $16.57 million to pick up over 302,000 shares on July 21, in the largest insider purchase, while two other Board members made lesser purchases. Kelvin Westbrook and Teresa Taylor spent $69K and $124K on TMUS shares, respectively.
All of these transactions pushed the insider sentiment on T-Mobile strongly positive, and Wall Street has been impressed. Deutsche Bank’s Bryan Kraft commented, "We believe T-Mobile has a massive EBITDA and FCF growth opportunity in front of it; driven by merger synergies, improved scale, an industry-leading spectrum position, a turnaround of the legacy Sprint operations, and continued subscriber momentum in the preexisting T-Mobile operations."
To this end, Kraft rates TMUS a Buy along with a $140 price target, which implies nearly 30% upside potential from current levels. (To watch Kraft’s track record, click here)
Overall, T-Mobile shares get a Strong Buy rating from the analyst consensus, based on 13 Buys against just 3 Holds. The stock is selling for $108, and the average price target of $116.68 suggests its still has room for 7.5% upward growth this year. (See T-Mobile stock analysis on TipRanks)
Kinder Morgan (KMI)
Next up, Kinder Morgan, is a major player in the North American energy infrastructure. The company owns and operates natural gas and petroleum product pipelines, totaling over 83,000 miles. Kinder Morgan has the largest network of natural gas pipelines in the US, and also operates over 150 pipeline terminals.
Depressed demand for oil and gas during the economic shutdown put serious presser on KMI shares, which have still not fully recovered. The company’s earnings slipped in Q1, and fell further in Q2, down to just 17 cents per share. But EPS remained in positive numbers, and the guidance for Q3 is better, at 20 cents. Despite the low earnings, the company announced earlier this month that it will pay out the Q2 regular dividend at 26.25 cents per share. That represents a 5% year-over-year increase, and gives a strong yield of 7.45%.
A few days after the earnings release and dividend declaration, Richard Kinder, EC and Director, laid down $4.24 million to add another 300,000 shares to his holdings. After the purchase, Kinder owns more than $3.7 billion worth of KMI.
Justin Jenkins, writing for Raymond James, agrees that there is plenty to like about KMI stock. He writes, “[We] still like Kinder Morgan's (KMI) relative positioning. Given lower relative variability in base cash flow, similarly solid/stable leverage, and broad diversification, we think shares of KMI should Outperform... Longer-term, we believe the themes of conservative dividend growth, insider ownership, C-Corp. tax status, and steady progress towards lower leverage should place KMI ahead of most of the rest of the midstream group…”
In line with his comments, Jenkins reiterates his Buy rating on the stock, and his $17 price target implies an upside potential of 22% for the coming year. (To watch Jenkins’ track record, click here)
Overall, KMI's Moderate Buy consensus rating is based on 10 reviews, including 4 Buys, 5 Holds, and 1 Sell. Shares are trading at $14, and the $17.60 average price target suggests a 26% upside. (See KMI's stock analysis at TipRanks)
FB Financial Corporation (FBK)
Nashville-based FB Financial, last on today’s list, is a bank holding company and owner of First Bank, with 73 branches in Tennessee, Alabama, Georgia, and Kentucky offering both full-service banking and mortgage services to individual and commercial customers. FBK boasts over $6.4 billion in assets.
Earlier this month, FBK gave investors a pleasant surprise, reporting strong EPS gains in Q2. The earnings, which came in at 74 cents per share, indicated a profound turnaround from Q1, more than tripling sequentially. The EPS was also up 5% year-over-year. At the top line, quarterly revenues reached $136.8 million, beating the forecast by 39% and growing a stunning 52% from the year-ago quarter.
On the insider front, Executive Chairman James Ayers bought more than 15,000 shares, paying over $383,000 for the block. His move is the first insider trade here in three months, and swung the sentiment needle strongly positive.
SunTrust Robinson analyst Jennifer Demba sees reason for optimism in FBK’s near-term future. She writes, “Mortgage banking momentum should continue in 3Q20 and help offset the likely additional credit mark needed for the FSB acquisition scheduled to close in August. The LLR of 2.51% of total loans, ex PPP seems adequate, in our view, relative to peers given FBK's loan exposures. At 10.3x 2021E EPS/1.34x TBV versus the peer median of 15.0x/1.13x, the shares remain attractive, in our view."
Demba gives the stock a price target of $30, suggesting a one-year upside of 19% and fully supporting her Buy rating. (To watch Demba’s track record, click here)
Not all analysts on the Street voice Demba's bullish forecast. 2 other analysts rate FBK a Hold, and the 12-month average price target implies a modest upside of nearly 8%. (See FBK stock-price forecast on TipRanks)
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